In the latest high-profile move, the London Stock Exchange said last week that its MTS Cash platform would shift a fifth of its trading volume — which averages 13.4 billion euros ($15.3 billion) a day — to Milan. Trading in British government bonds will stay in London.

Rival BrokerTec is moving trade in euro-denominated repos and government bonds to Amsterdam by February. Multi-dealer electronic platforms Tradeweb and MarketAxess, which connect investors to bond dealers, have also made preparations to move business from London to the Dutch financial capital.

The MTS move shows the industry is increasingly choosing to vote with its feet to avoid losing “passporting” — the automatic right for a firm registered in a European Union country to do business with any other member state — after Britain leaves the bloc in March.

Passporting has allowed a large chunk of the trade in European government bonds, worth tens of billion euros a day, to be done through London via a network of investment banks, interdealer brokers and trading platforms.

Prime Minister Theresa May’s Brexit agreement with Brussels allows for a transition period when rules on relations with EU countries, including passporting, remain unchanged. However, the deal faces strong opposition at home and if parliament fails to approve it, Britain could leave the EU with no transition — and no passporting.

“If there is a no-deal Brexit, we wouldn’t have a European passport any more and would no longer be a designated platform for European Union debt management offices,” a senior MTS official told Reuters.

“Even if a no-deal Brexit is not necessarily a very high probability, can (MTS) afford to take the chance? No - it’s too huge a risk. Continuity of services is a must,” said the official, who requested anonymity as he is not authorised to speak on the matter.

Even if the Brexit deal wins approval, the transition period is supposed to expire at the end of 2020. After that, British-based financial business could be governed by “equivalence”, a system which offers limited access and can be withdrawn with a month’s notice.

Bankers say that as the March deadline nears, they can no longer look past the risk of losing passporting rights at a stroke.

“Plan B is slowly becoming Plan A because it is becoming late in the day with the Brexit negotiations, and we are running short of time to secure a smooth transition of our client business in the continent,” an executive at a London-based primary dealer bank told Reuters.

“So for business continuity, we have decided to move operations relating to market-making in European government bonds to the continent,” he said, requesting anonymity.

While it is hard to quantify how much this shift would affect jobs in London, industry executives agree it would certainly drag on the City’s pre-eminence as a European financial centre.

European borrowers fret that not all dealers will be as committed to the business, given the costs of setting up elsewhere. Portugal’s debt management office chief Cristina Casalinho said recently that Brexit will raise costs for European governments and taxpayers.

A EUROPEAN HUB

London-based banks are estimated to arrange around 70 percent of sovereign European debt sales, either by “market making” in bond auctions — buying debt in primary markets and placing it with investors — or managing syndicated deals to sell bonds directly to international fund managers.

Barclays and HSBC are among the most active in euro-denominated bond issuance, underwriting nearly 150 billion euros of the debt last year, or 12 percent of the market, according to Refinitiv data.

JP Morgan, Goldman Sachs and Citigroup are also among the top 10 in euro primary markets. Between them, they underwrote over 170 billion euros of bond issuance last year.

All run European operations from London but 25 banks, including JPMorgan and Barclays, have applied for licences to open EU hubs .

EU regulators too said last week they were stepping up preparation for a no-deal Brexit to ensure trillions of euros in cross-border derivatives transactions would not be disrupted .

Officials hint a move to continental Europe by London-based businesses may be necessary. “It is a fact that if they lose their passporting rights, then the continuity of the services will be interrupted. Obviously that’s not desirable,” a spokesman for Austria’s Treasury said. (Reporting by Abhinav Ramnarayan, Editing by Sujata Rao and David Stamp)